GAMA 2006 FIRST QUARTER SHIPMENT ANALYSIS

Mike Potts is a writer and consultant who has been involved in aviation for more than 30 years....Read More

Historic first quarter billings little short of amazing!

By The General Aviation Manufacturers Association (GAMA) has issued its first quarter delivery numbers- and the results are little short of amazing. It was- GAMA proclaimed- the best first quarter for billings in the history of business aviation!

Billings for the industry totaled almost $4 billion ($3.99bn). That’s a 39.7 percent increase over last year- when first quarter billings were almost $2.9 billion ($2.856bn). Deliveries- meantime- totaled 845 units- up 34.1 percent from the same period in 2005- when 630 deliveries were reported.

'These positive figures- if sustained- are an indication that the year will be a solid one for general aviation-' said GAMA president and CEO Pete Bunce in what can only be described as an overwhelming understatement.

To put $4 billion in perspective- that’s more billings than GAMA recorded for the whole year in any single year before 1997.

This record performance is even more remarkable because it immediately follows the expiration of the accelerated depreciation tax program in the United States- which ended on December 31- 2005. The expected scenario from that situation would have been a very strong fourth quarter for both billings and deliveries as customers moved to take advantage of the accelerated depreciation program while it was still available.

Following that strong fourth quarter (which did occur)- you would have expected to see a drab first quarter because all the market demand would have been expended in the year-end sales frenzy. In other words- all the January airplanes would have been delivered in December. But that scenario most definitely did not occur. Instead of a downturn- things just kept rolling along.

This is a sign of a very solid recovery indeed… in fact- perhaps an unprecedented recovery! In almost 30 years of watching this industry grow and contract- and following the economic trends that drive it- I’ve never seen anything quite like this. Looking back at delivery records that stretch back to the years just after World War II- I still don’t see any historic parallel.

So where is this going? Having just acknowledged that this year’s first quarter performance might be unprecedented- it may seem risky to use historic trends to predict the future. Any other methodology- however- would seem to be just guessing. Besides- history has allowed us to make some fairly accurate forecasts in the past- so we’ll stick with history as the most probable barometer.

Based on the past three years of GAMA delivery numbers- first quarter deliveries have averaged about 18 percent of the final year’s total. Billings for the same period averaged 19.5 percent of the full year. If this year’s market behaves like the most recent three-year trend- we can expect total 2006 deliveries to approach 4-700 units- with billings in the $20.5 billion range.

The past six-year trend argues for a somewhat more modest forecast. Over the past six years GAMA first quarter deliveries have averaged 20.1 percent of the year’s total. First quarter billings have averaged 21.7 percent of what we can expect to record over the full year. So a forecast based on a six-year average projection would expect 2006 deliveries to reach 4-200 units- or perhaps a few more. Billings in this scenario could be expected to approach $18.4 billion. Either way- 2006 would have to qualify as a pretty good year.

It should be noted that the six-year trend includes 2001- which was deeply skewed by the recession in progress at the time- as well as the economic impact of the 9/11 terrorist attacks on the United States. So you could expect a six-year forecast to be perhaps too pessimistic.

Creating a five-year history that deletes the 2001 results creates a prediction somewhere between the bullish three-year outlook and the more conservative six-year forecast. Five-year average deliveries for the first quarter were 19.32 percent of the year’s total- while first quarter billings were 21.08 percent of the year-end total. Using these numbers to forecast 2006- we can expect to see deliveries at the 4-375-unit level with billings coming in at about $19 billion.

So- to sum up- history suggests we’ll see unit deliveries somewhere between 4-200 and 4-700- with the most probable estimate around 4-400. Billings should be somewhere between $18.4 and $20.5 billion- with the most likely figure being about $19 billion.

Looking at those numbers- one has to wonder whether the industry can really accelerate production enough to deliver 1-100 more airplanes than it did a year ago. That’s what it would take for the three-year trend forecast to become a reality.

Even the six-year trend forecast would have to see production pick up by more than 600 units over the 2005 total of 3-580. Can that really happen? It will be interesting to find out. It should be noted that last year’s delivery totals and billings exceeded my most optimistic early year forecasts- so the higher totals shouldn’t be dismissed too lightly. It’s a hot market out there right now.

Without further ado- let’s take a look at the details of this remarkable 2006 first quarter.

Business Jets The business jet segment of the market is off to a great start – fully 36 percent ahead of the first quarter in 2005. A very common theme in this column through much of last year was that the highest end of the business jet market – the bizliner- or airliner-based business jet segment – was under-performing the rest of the market. Not so this first quarter.

Boeing led the market with four BBJ deliveries – a total that matched its entire 2005 output. Airbus followed closely- reporting three deliveries- which was 50-percent ahead of its 2005 first quarter results. That makes seven bizliners in just one quarter! The total for all of 2005 was only 13.

For the more traditional business jets- Cessna claimed its usual market leading position with 66 deliveries. That represented close to a 25-percent gain over Cessna’s first quarter 2005 total of 53 units- and in fact was within a single airplane of matching its fourth quarter total of 67 units. That’s impressive.

The business jet maker with the highest dollar volume sales was Bombardier- with sales in excess of $1.27 billion. Bombardier scored solidly in second place in the traditional business jet market unit delivery category- with 56 deliveries- representing a 30-percent increase over its first quarter 2005 total of 43 units. In fact- Bombardier’s first quarter unit total was four aircraft ahead of its 2005 fourth quarter results.

It’s a rare accomplishment for a company’s first quarter delivery totals to exceed the immediately past fourth quarter total- but in this remarkable quarter it actually happened twice. In addition to Bombardier- Gulfstream also delivered more airplanes this first quarter (25) that it did in the preceding three months- when it reported 24 deliveries. Gulfstream’s 25 deliveries put the company in third place for the traditional business jet market. Those 25 Gulfstreams sold for a total of $926 million- putting Gulfstream into second position in industry business jet billings.

Raytheon was next in total jet deliveries- with 22. This was a 69-percent gain over the first quarter of 2005- when Raytheon’s jet deliveries totaled 13 units.

Dassault also enjoyed a nice gain over its 2005 first quarter results- delivering nine units in the first quarter of 2006 worth more than $245 million. This compared with just five units delivered in the first quarter a year ago - a gain of 80 percent.

Embraer’s Legacy Executive model recorded four deliveries in the first quarter- compared with two a year ago- representing a 100-percent gain.

This is the first quarter in recent memory when all of the jet markers were ahead of their totals for the same period from a year ago. Clearly the jet market can now be pronounced fully recovered.

Interestingly- none of the new jet manufacturers reported deliveries this quarter. It had been anticipated that Sino Swearingen might make the first delivery of its long-awaited SJ30-2 in the first quarter of 2006- particularly since the airplane’s type certificate milestone was announced at the NBAA convention last October- but that didn’t happen. It has also been predicted that the first Eclipse 500 would reach the market sometime this year… maybe in the second quarter.

To sum up- then- the jet market is off to a roaring start in 2006. Backlogs are strong. The recovery that began with the first rumblings in the piston market fully three years ago is now fully developed. Enjoy this – it’s the strongest business airplane market we’ve seen in 25 years.

The Turbos If there is a weak segment at all in this flow of positive news- it’s in the turboprop market where things are good… but just not as good as in the jet segment or the piston products. Overall- the turboprop market was up 3.5 percent from a year ago- with 59 units delivered in the first quarter of 2006 compared with 57 in the same period in 2005. But while the performance of the total turboprop market was lackluster compared to the other segments- some of the individual companies scored strong gains.

Unsurprisingly- the market leader in turboprops was once again Raytheon – the company that has dominated the turboprop segment without serious challenge for more than 40 years. Raytheon outperformed the rest of the turboprop market rather handily- recording a 50-percent gain in deliveries in the first quarter of 2006 over a year ago. In raw numbers- Raytheon delivered 21 of its King Air models- up from 14 in the first quarter of 2005.

Raytheon actually delivered a 22nd King Air in the quarter- to the U.S. military- but GAMA doesn’t count military deliveries in its commercial totals. Also not counted in the GAMA numbers were 15 Raytheon T-6A single-engine turboprop trainers- which also go to the U.S. military. So Raytheon’s dominance in the turboprop segment was even greater than the GAMA numbers would indicate.

Second place in the turboprop market was hotly contested- with Cessna claiming the number two position with 12 units- just one unit ahead of Pilatus- which had 11- and two ahead of Piper- which had 10.

Cessna’s deliveries included five of its single-engine Caravan I models and seven of its Caravan IBs. For Cessna this represented a decrease from the 22 Caravans it delivered in the first quarter of 2005. For Pilatus- however- the 11 PC-12s delivered in the first quarter of this year marked a 22 percent increase over the nine units it reported a year ago.

New Piper’s numbers were also up- by nearly 43 percent after the company reported delivering 10 Meridian single-engine turbos- up from seven in the same quarter last year. It should be remembered that Piper’s numbers in last year’s first quarter were still being affected by hurricane damage the company had suffered in the fall of 2004.

Elsewhere in the turboprop market- EADS Socata’s numbers were flat- with the company reporting four deliveries for the quarter this year equaling four a year ago. The Socata deliveries this year- however- were the first of its new single-engine TBM 850. With production of this new model just starting up- look for Socata’s numbers to improve substantially as the year progresses.

Piaggio was the final entrant in the turboprop market- with one delivery of a P180 Avanti II model. Like Socata- Piaggio’s numbers were flat compared with last year’s first quarter- when it also delivered one Avanti.

Piston Singles The piston market was the hottest segment of all in the first quarter of 2006. Single-engine piston sales were up 37.6 percent over the previous year. The actual increase was a whopping 163 units- up from 434 airplanes in 1Q 2005 to 597 airplanes in 2006.

At least two piston manufacturers increased their deliveries by more than 80 percent over a year ago. Two others actually had 100-percent increases- (but that was only because they didn’t deliver any airplanes in the first quarter of 2005).

The continued growth in the piston market is a very strong sign that the current recovery is very solidly based. Both the Honeywell and Rolls-Royce market forecasts have predicted a solid market through the remainder of this decade. The strength we are seeing in the piston market is a continuing sign that the Honeywell and Rolls-Royce predictions are on track.

The single engine piston market started out with a real two-horse race last year between Cessna and Cirrus to see who would emerge as the single-engine production champion. Cirrus started out with a solid lead (143 to 102 in the first quarter) but by the end of the year Cessna had flexed its production muscles and cruised to an easy victory.

This year sees Cessna once again solidly in the lead- with deliveries of 187 single-engine piston airplanes in the first quarter – representing an 83 percent increase over the same period in 2005. That’s impressive!

Cirrus- meantime- is comfortably in second place with 159 units- and also scored a nice gain of 11 percent over its 2005 first quarter total of 143. Cirrus continues to proudly maintain its position as builder of the largest selling aircraft model- the Cirrus SR22- having delivered 124 SR22s in the first quarter of 2006 (up six percent from the 117 SR22s it delivered in the first three months of 2005).

Diamond Aircraft claimed third place in single engine piston production with delivery of 55 of its DA20 and DA40 models. This was actually a decrease in single-engine production for Diamond from a year ago- when it delivered 62 singles. The slight drop was almost certainly a product of Diamond’s decision to dramatically increase twin-engine production. More on that a little later.

Columbia- formerly Lancair- was next in single-engine deliveries with 46 of its Columbia 400 models. This was an 84-percent increase over the 25 Columbia 400s that Columbia delivered a year ago.

New Piper- once an industry leader in single-engine production- is now in the middle of the pack. Nonetheless- New Piper had good percentage gains- delivering 34 units in the first quarter. That marked an increase of better than 41 percent over the 24 singles the company delivered in the first quarter of 2005.

Mooney delivered 20 singles in the first quarter of 2006- a number equal to its first quarter 2005 production. Clearly 20 airplanes a quarter is a very sustainable number for Mooney- which has delivered 20 airplanes in each of the five previous quarters.

Raytheon reported delivery of 15 single-engine Bonanza models. This was an increase of 67 percent over the nine Bonanzas it delivered in the first three months a year ago. Raytheon’s rate of Bonanza deliveries was very uneven in 2005- ranging from as few as four airplanes in one quarter to 39 in another. The 39 came in the fourth quarter of last year- suggesting that tax-based buying and the desire to push as many airplanes as possible into the fourth quarter of last year may have impacted the number of airplanes available for sale this year. That’s how the market always used to operate - it’s nice to see somebody still does it like they used to.

The next place in the single-engine delivery market was shared by two companies: Maule and American Champion. Both recorded 13 deliveries for the quarter- although one was probably happy about the result while the other likely was not.

For Maule the 13 deliveries marked a big gain over the six airplanes it reported to GAMA in the first quarter of 2005. For American Champion- however- the 13 deliveries this quarter marked a 31-percent downturn from the 19 airplanes it delivered in the same period last year.

The remainder of the single market was divided among manufacturers that delivered five or fewer airplanes for the quarter. Gippsland’s sales were flat between this year’s first quarter and last- with five units delivered in each.

Liberty- the newcomer to the market that debuted late last year- delivered four airplanes this quarter. That’s a 100-percent gain over last year’s first quarter- when no Liberty’s were delivered. It’s also a 100-percent gain over the fourth quarter of 2005- when Liberty had two deliveries. Such are the oddities of comparing percentages gains using very small numbers.

Symphony also had a gain- with three deliveries this quarter compared with none a year ago. Symphony is to be applauded for having just completed its first full year of operation after emerging from bankruptcy.

Finally- Tiger completed the first quarter with two deliveries- down 50-percent from the four airplanes it reported in the same period a year ago.

Piston Twins Then there is the piston twin market. Although not yet very large- the piston twin market is staging a remarkable comeback. Due largely to the introduction of the diesel-powered Diamond DA42 Twin Star- the piston twin market has experienced growth of 241 percent from the first quarter of 2005 to the first quarter of 2006. That’s right – 241 percent.

Moreover- compared with the first quarter of 2004- the 2006 sales total is up by 583 percent. Now that’s real growth- and piston twin sales this year could be headed for a 20-year milestone.

In the first quarter of this year piston twin deliveries totaled 41 units- compared with just 12 a year ago and only six in the first quarter of 2004. This quarter’s 41-unit total suggests that piston twin deliveries will easily top 160 units this year and could get close to 200 with a little luck. To find another year when that happened you have to go back to 1985- when 193 piston twins were sold.

This newly revived piston twin market is divided among three competitors: Diamond- Raytheon and The New Piper Aircraft.

The leader- with nearly 66 percent of the market- is Diamond Aircraft- who reported delivery of 27 Twin Stars in the first quarter. This was up from just two in the first quarter a year ago- when the Twin Star made its market debut.

Raytheon delivered nine of its Baron models- up from the four Barons it delivered in the same three-month period last year. Meantime- Piper’s twin sales totaled five units for the period- off slightly from the six it delivered a year ago.

So there you have it – a detailed look at the most remarkable first quarter in the history of business aviation. In spite of high fuel prices and the threat of the FAA imposing a user fee system on the air space in the United States- the industry is growing strongly in every segment. It’s a great time to be in the general aviation business.

To view a full reproduction of GAMA’s First Quarter 2006 shipment report- See the PDF version of this article.